Coal’s Place in the Energy and Electricity Space

By Betsy Monseu, CEO, American Coal Council

Coal is under pressure in the United States, and not the natural kind of pressure involved in its creation from plant material. The pressure coal is under today is of a distinctly unnatuBy Betsy Monseu, American Coal Council ral kind, shaped by an increasingly far-reaching and unbalanced regulatory agenda. The energy playing field continues to be tilted away from coal, a primary target of that agenda. Yet coal’s leading position as a critical fuel in the electricity marketplace continues. Though its share of that marketplace has generally been trending down over the past several years, coal remains the largest of any fuel source for electric generation. The Energy Information Administration (EIA) forecasts coal to retain the leading position in 2015 as well as over the longer term – including a 34 percent share in 2040.

For 2015, EIA estimates that coal’s piece of the electric generation pie will be down some 2 percent from last year to about 36 percent.2 Part of this decline is due to increased use of natural gas. With natural gas prices generally forecast to be lower this year than in 2014, some coal-to-gasswitching within the existing generation fleet will occur.3 Also, new natural gas generating capacity will be added this year. Another important reason for the decrease is the effect of environmental regulations on the electric power sector. According to EIA, about 13 gigawatts of coal generating capacity is slated for premature retirement this year, primarily due to compliance with the Environmental Protection Agency’s (EPA) Mercury and Air Toxics (MATS) rule.

EIA has projected the premature closure of a total of 60 GW of coal capacity by 2020 (not including closures from the greenhouse gas rules proposed by EPA in 2014). This is about 20 percent of the entire coal fleet. This projection includes at least 54 GW being shut down in the very near term – by 2016. By 2018, natural gas capacity will be greater than coal, nuclear, and hydro combined.

I. Coal in Context

It’s instructive to review coal in the context of the ‘‘Polar Vortex’’ winter of 2014. Coal plants – including many planned to shut down for MATS compliance beginning in 2015 – were absolutely essential in meeting the nation’s electricity needs. During periods of plunging temperatures and great stress on power demand, the ability to operate these plants was critical to avoiding brownouts and blackouts. Coal plants provided 92 percent of the incremental year-over-year electricity demand experienced during the winter of 2014.6 Electricity generation from natural gas decreased due to availability and deliverability problems, and its diversion to fuel residential heating needs